Lloyd's Maritime and Commercial Law Quarterly
LIENS ON SUB FREIGHT REVISITED: CHARGE OR SUI GENERIS RIGHT OF INTERCEPTION
Ian Teo*
Duncan v Diablo
Many jurisdictions, including England and Singapore, require registration of certain charges over a company’s assets, failing which the charge is void as against the liquidator of the company. An issue which has arisen from time to time is whether a lien on sub-freight (or sub-hire) is a charge on book debts or a floating charge, and as such registrable.
The issue arose again in the recent decision of the Singapore High Court in Duncan, Cameron Lindsay v Diablo Fortune Inc.1 This is the first published Singapore judgment on this issue. A Singapore company, Siva Ships International Pte Ltd (“the company”) bareboat chartered the vessel V8 Stealth II from Diablo Fortune Inc. The bareboat charter was on an amended BARECON form. Clause 18 of the charterparty confers a lien “upon all cargoes, sub-hires and sub freights belonging or due to [the Company] …” (“the contractual lien”). The company sub-chartered the Vessel to V8 Pool Inc (“V8 Pool”).
On 19 December 2016, the company filed a winding-up application in Singapore. On 30 December 2016, Diablo sent a notice of lien to V8 Pool. V8 Pool withheld payment. The company was wound up on 6 January 2017. On 13 January 2017, Diablo sent a second notice of lien, this time over bill of lading freight, to a Repsol Petroleo SA—the consignee under a bill of lading issued by Diablo. In the meantime, Diablo commenced arbitration in London under the charterparty against the company.
There were three applications before the court. First, there was an application by the liquidator of the company seeking a determination that Diablo’s contractual lien is void against the liquidator pursuant to s.131(1) of the Singapore Companies Act2 for want of registration. Secondly, Diablo applied for extension of time to register the contractual lien. Diablo also filed an application to stay the Singapore proceedings in favour of London arbitration. This Comment is interested in the first issue—whether a contractual lien is a “charge” within the meaning of s.131. If so, it is registrable either as a “charge on book debt” or a “floating charge”.
The learned judge, Audrey Lim JC, noted that s.131(1) is derived from the UK Companies Act 1948, s.95.3 As such, English authorities, whilst not binding on the Singapore courts, are highly persuasive. Various English authorities4 have held that a contractual lien gives rise to “an equitable assignment by way of a charge” and as such is registrable either as a “charge on book debts” or as a “floating charge”. The learned judge noted that, “whilst the effect and extent of the right” conferred by the lien on sub-freight or sub-hire were widely acceptable, the “characterisation” of the right remains somewhat controversial.5
* Adjunct Fellow, Centre for Maritime Law, National University of Singapore; Partner, Rajah & Tann Singapore LLP.
1. [2017] SGHC 172.
2. Cap 50, 2006 Rev Ed.
3. Duncan v Diablo, [40].
4. In re Welsh Irish Ferries
(The Ugland Trailer) [1986] Ch 471; [1985] 2 Lloyd’s Rep 302; Annangel Glory Compania Naviera SA v M Golodetz Ltd, Middle East Marketing Corp (UK) Ltd and Clive Robert Hammond (The Annangel Glory)
[1988] 1 Lloyd’s Rep 45; Western Bulk Shipowning III A/S v Carbofer Maritime Trading APS (The Western Moscow) [2012] EWHC 1224 (Comm); [2012] 2 Lloyd’s Rep 163.
5. Duncan v Diablo, [41].
CASE AND COMMENT
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